Sanctioned for Silence: Ignoring Settlement Demands Cost a Patent Owner $250,000

“Google (and the court) used these letters for precisely what Rule 408 forbids: to prove that EscapeX’s infringement claims lacked merit.”

Introduction

On its face, EscapeX IP, LLC v. Google LLC reads like a cautionary tale ripped from the patent litigation playbook. A non-practicing entity (“NPE” or pejoratively “patent troll”) you’ve never heard of sues a tech giant over a patent covering “artist-specified dynamic albums,” a function of YouTube.

The NPE ignores the defendant’s detailed letters explaining why its case is meritless. It eventually files a voluntary stipulation of dismissal, falsely representing that the defendant agreed to “bear its own costs, expenses, and attorneys’ fees.” The defendant agreed to no such thing and moved for sanctions, asserting the NPE’s entire patent infringement case was frivolous.

When sanctions came, they came hard—$254,827.48 in attorneys’ fees, with the patent owner’s counsel held jointly and severally liable for part of the award. The Federal Circuit affirmed those sanctions in EscapeX IP, LLC v. Google LLC, No. 24-1201 (Fed. Cir. Nov. 25, 2025) (“EscapeX, slip op.”).

Case closed. Justice served. Another patent troll learns an expensive lesson about filing frivolous lawsuits.

Except that’s not the whole story. Buried beneath EscapeX’s undeniable misconduct lies a novel framework for proving “exceptional case” to obtain attorneys’ fees under 35 U.S.C. § 285 that should trouble anyone who litigates patents.

That framework relies on informal correspondence between the parties, which looks remarkably like settlement negotiations, as evidence of frivolous claims. A framework that bypasses the procedural and evidentiary protections Congress and the courts built into the rules governing dispute resolution. And, here, a framework that punished EscapeX for the one thing it arguably did right—voluntarily dismissing its case with prejudice after its patent was invalidated elsewhere by a different court at the behest of a different accused infringer.

Bad acts made questionable law.

To appreciate why this decision matters beyond EscapeX’s arguable misconduct, we need to look past the bad acts and examine the evidence the court actually relied upon to find its infringement theory was frivolous, justifying the award of attorneys’ fees. The answer reveals tensions in § 285 jurisprudence with the rules of evidence and procedure that the Federal Circuit failed to address.

The Patent and the Accusations

EscapeX’s patent, U.S. Patent No. 9,009,113 (“the ’113 patent”), covered a system for “artist-specified dynamic albums”—technology allowing artists to remotely update albums stored on users’ devices after download. The claims required an “artist specific application” that would play the dynamic album, a term the specification distinguished from “a single application that streams music from multiple artists.” ’113 Patent at col. 4:60-64.

A month after incorporating as a Texas entity, EscapeX sued Google in the Western District of Texas, alleging that YouTube Music infringed the ’113 patent. Soon after, the case was transferred to the Northern District of California with no objection from EscapeX. Before answering EscapeX’s complaint, Google sent a letter to EscapeX explaining a fundamental problem with its infringement theory. EscapeX’s complaint “cobbled together features” from two different products—YouTube Music and YouTube Video—as though they were the same thing. The asserted infringement theory mixed and matched functionality that didn’t exist together in any single Google product.

Rather than pursue this theory further, EscapeX switched horses. It amended its complaint to accuse YouTube Video with “Auto-Add” instead. But this new theory had its own problem, one that Google identified in a second letter. The accused Auto-Add feature predated the ’113 patent’s priority date. As Google’s letter explained, “A basic online search would have revealed” this timing issue. If Auto-Add practiced the patent’s claims, it also anticipated and invalidated them. EscapeX couldn’t have it both ways.

EscapeX’s Silence

What happened next—or more precisely, what didn’t happen—would become central to the fee award. EscapeX never substantively responded to Google’s second letter. Google followed up several more times, demanding that EscapeX voluntarily dismiss its lawsuit. Each time, silence.

Meanwhile, in a parallel case in the Southern District of New York, another defendant, Block, Inc., challenged the ’113 patent under 35 U.S.C. § 101. The court found all claims directed to patent-ineligible subject matter and held the patent claims invalid. EscapeX IP LLC v. Block, Inc., 652 F. Supp. 3d 396 (S.D.N.Y. 2023). EscapeX didn’t appeal.

After the appeal window closed, Google demanded that EscapeX dismiss its case. EscapeX complied with the demand—but not in the way Google expected. It filed what purported to be a “joint stipulation of dismissal,” representing that the parties “jointly stipulate to the dismissal of this action” and “further jointly stipulate and agree that each party shall bear its own costs, expenses, and attorneys’ fees.” EscapeX, slip op. at 3. EscapeX’s attorney attested that “concurrence in the filing of this document has been obtained from [Google’s] counsel.” Id.

None of this was true. Google had never seen the stipulation before it was filed. No one at Google had consented. Google demanded withdrawal of the false stipulation of dismissal. EscapeX complied with the demand the same day. Several days later, the parties filed a genuine stipulation of dismissal with prejudice that made no representation about each party bearing its own costs, expenses, and attorneys’ fees.

Google’s Fees Motion and the Missing Evidence

Google moved for attorneys’ fees under § 285, arguing that EscapeX’s conduct was “exceptional” because it had asserted frivolous claims and unreasonably prolonged the litigation. The motion detailed EscapeX’s mix-and-match first theory, its self-defeating second theory, its silence in response to Google’s letters, and its false stipulation of dismissal.

EscapeX’s opposition was sparse. It argued Google wasn’t a prevailing party—a position it later abandoned on appeal. On the merits of exceptionality, it devoted barely two pages, one-and-a-half of which recited the legal standard. Critically, EscapeX never disputed that it had failed to conduct an adequate pre-suit investigation. It submitted no declarations explaining what investigation it had performed. It offered no technical evidence supporting its infringement theory. It provided no explanation for why the accused Auto-Add’s post-priority-date functionality differed from its pre-priority-date functionality in any claim-relevant way.

At oral argument on the fees motion, the district court zeroed in on these gaps. When interrogated about the pre-suit investigation during oral argument, EscapeX’s counsel requested leave to file a declaration with evidence detailing its pre-suit investigation of infringement. The court’s response was direct. EscapeX “already had [its] chance” during briefing, and it was now “too late” to “file further declarations or make further arguments.” Appx484 (7:18-24); Appx486 (9:8-10).

The district court granted Google’s motion for attorneys’ fees in a notably brief two-page order. The order declared it “obvious that EscapeX conducted no serious pre-suit investigation and that this case was frivolous from the start.” EscapeX IP LLC v. Google LLC, Case No. 22-cv-08711-VC, Dkt. 41 at 1 (N.D. Cal. Aug. 16, 2023) (“D. Ct. op.”). It noted that EscapeX’s complaints “cobbled together features” from different products and ultimately accused a feature that “predated EscapeX’s patent.” Id. It found that Google had “placed EscapeX on notice of the baselessness of its claim early and often” through its letters. EscapeX was ordered to pay $191,302.18. Id.

EscapeX’s Failed Mulligan

EscapeX tried again. It moved under Federal Rule of Civil Procedure 59(e) to amend the judgment, claiming “newly discovered evidence” consisting of two short declarations from its president and an engineer who had prepared its pre-suit claim charts. These declarations, EscapeX argued, showed that “meticulous steps were undertaken” before filing suit. EscapeX, slip op. at 4.

The problem was obvious. Declarations from EscapeX’s own employees about EscapeX’s own pre-suit investigation weren’t “newly discovered.” Google argued that EscapeX “could have filed those declarations with its opposition to Google’s fees motion but chose not to.” Appx530-33. The district court agreed and denied the Rule 59(e) motion, finding EscapeX had “wholly failed to meet the Rule 59(e) standard for amending a judgment.” EscapeX, slip op. at 4.

Google then moved for additional fees under 28 U.S.C. § 1927, arguing EscapeX’s Rule 59(e) motion itself was frivolous. When the district court asked EscapeX’s counsel why it shouldn’t grant sanctions, counsel’s answer was revealing: “The client wanted us to try to put in more.” Appx689 (5:5-7). The court wasn’t sympathetic. It found the Rule 59(e) motion frivolous and held EscapeX’s attorneys jointly and severally liable for an additional $63,525.30.

The Federal Circuit Affirms

On appeal, EscapeX argued that the district court had abused its discretion by finding its infringement case frivolous when none of the underlying claim construction or infringement issues had been adjudicated. The court, EscapeX contended, had improperly relied on Google’s informal letters rather than requiring proper merits briefing and argument.

The Federal Circuit rejected this argument. Quoting Thermolife Int’l LLC v. GNC Corp., 922 F.3d 1347, 1356-57 (Fed. Cir. 2019), the court explained there was “‘no abuse of discretion in the district court’s resting its exceptional-case determination on an examination of an issue—infringement, and specifically the basis for alleging infringement—that was neither fully adjudicated nor even fully litigated before the judgment on the merits.’” EscapeX, slip op. at 6 n.2. Cases can be frivolous from the start, even if no court ever formally says so.

The court also endorsed using Google’s letters as evidence. Quoting Thermolife again, it observed that “‘one consideration that can and often should be important to an exceptional-case determination is whether the party seeking fees provided early, focused, and supported notice of its belief that it was being subjected to exceptional litigation behavior.’” EscapeX, slip op. at 9-10 (quoting Thermolife, 922 F.3d at 1357). Google’s letters qualified as the requisite notice. EscapeX’s silence in response supported the frivolousness finding. “‘The presence of such notice, followed by continuation of litigation, can be a factor in justifying an award of attorney’s fees.’” Id. at 10 (quoting Thermolife, 922 F.3d at 1358).

As for EscapeX’s procedural arguments, the court was unmoved. EscapeX had failed to present evidence of its pre-suit investigation when it mattered. Its attempt to fix this through Rule 59(e) came too late. “The declarations from EscapeX’s CEO and one of its engineers were not ‘newly discovered evidence,’ as these witnesses were always within the control of EscapeX and their knowledge—including as to EscapeX’s pre-suit investigation—was always available to EscapeX.” Id.at 12.

What’s Missing from the Story

At this point, the legal analysis seems complete. Bad actor behaves badly, gets sanctioned, and loses appeal. But step back and consider what Google never proved through proper judicial process—as opposed to what it merely asserted in informal correspondence with EscapeX.

Google never filed a Rule 12(b)(6) motion to dismiss EscapeX’s complaint. Its theory that EscapeX’s complaint was self-defeating on its face was never tested before the court. And EscapeX’s response to Google’s theory was never articulated.

Google never filed a Rule 56 motion for summary judgment on patent invalidity or non-infringement. Its substantive defenses were never briefed, never adjudicated.

Google never submitted a Rule 11 motion asserting that EscapeX’s counsel filed the complaint without a good faith basis; the principal grounds for the § 285 sanctions. Nor did Google comply with Rule 11(c)(2) by serving an advance copy of a Rule 11 motion on EscapeX twenty-one days before formally filing the motion. EscapeX therefore never received the 21-day safe harbor that Rule 11 provides—a procedural protection designed to allow parties to take corrective action before sanctions apply.

No merits determination ever occurred in this case. The ’113 patent was invalidated in Block, not here. Google contributed nothing to that result.

So what did Google establish? It sent letters asserting that EscapeX’s claims were frivolous. EscapeX didn’t respond. EscapeX later voluntarily dismissed the complaint with prejudice after its patent was invalidated elsewhere. Google then moved for fees, presenting its own untested assertions as evidence of frivolousness. The court credited those assertions.

This brings us to questions that EscapeX apparently never raised, and that the Federal Circuit therefore never addressed. Foremost is whether Google’s letters to EscapeX should have been admissible at all.

The Rule 408 Problem

Google’s letters weren’t formal court filings. They were informal demands for voluntary dismissal, accompanied by explicit warnings of fee sanctions. The first letter told EscapeX that it “lacks a good faith basis for maintaining this action.” EscapeX, slip op. at 8. The second warned of “potential application for fees.” Id. at 9. Google’s subsequent correspondence repeatedly demanded dismissal.

This correspondence—demanding dismissal, warning of fee consequences if the case continues—is the hallmark of settlement posturing with an opening demand that EscapeX dismiss its case outright.

Federal Rule of Evidence 408 provides that “statement[s] made during compromise negotiations about the claim” are not admissible “to prove or disprove the validity . . . of [the] disputed claim.” The rule exists to encourage frank settlement discussions without fear that statements will later be used against the party making them—or, critically, against the party that received them and elected not to engage.

Google (and the court) used these letters for precisely what Rule 408 forbids: to prove that EscapeX’s infringement claims lacked merit. The letters’ substantive assertions about anticipation, non-infringement, and lack of pre-suit investigation were credited by the court as establishing frivolousness. EscapeX’s silence in response was treated as concession.

The Federal Circuit characterized the letters as providing “notice” rather than proving the merits—but this distinction collapses under examination. “Notice of frivolousness” necessarily incorporates the substance of what EscapeX was supposedly on notice of. The court’s reasoning appears circular: “Google told EscapeX the case was frivolous; EscapeX didn’t respond; the accusations were uncontested; and therefore the case was frivolous.” That chain works only if Google’s substantive assertions in its correspondence are credited—which is precisely what Rule 408 prohibits.

To be sure, Rule 408 expressly lists exceptions to that prohibition allowing one to use settlement discussions to (1) demonstrate witness prejudice or bias, (2) negate a contention of undue delay, or (3) prove obstruction of criminal proceedings. Courts have not strictly applied those exceptions. For example, the court in Blackbird Tech LLC v. Health in Motion LLC, 944 F.3d 910 (Fed. Cir. 2019) allowed settlement offers to be used as evidence of unreasonable litigation conduct, which does not fit neatly within any of the rule’s express exceptions.

The Blackbird Tech court looked to the parties’ settlement discussions to find that the plaintiff’s progressively declining settlement demands—from $80,000 down to a walk-away offer—showed the plaintiff sought nuisance-value settlements rather than genuine resolution. While not strictly within Rule 408’s express exceptions, the court’s analysis arguably complied with Rule 408 because it wasn’t using assertions made during settlement to prove or disprove any claim—it was using the pattern of offers to show bad faith litigation conduct apart from the merits of the case. As for the merits, the district court was fully informed of the patent owner’s meritless legal and factual contentions through fully briefed summary judgment motions.

EscapeX is different. Here, the letters’ substantive content—Google’s assertions about why EscapeX’s infringement claims were baseless—became the evidence of their frivolousness. The “notice” these letters provided was simply notice of Google’s litigation contentions. Crediting those contentions as true without adjudication is a significant step beyond Blackbird Tech’s limited holding.

The Policy Problem

Rule 408’s policy rationale is straightforward. Parties should be allowed to negotiate frankly without fear their statements will be weaponized. This protection runs both ways. The party making a settlement overture shouldn’t have its offers used against it. But equally, the party receiving a settlement demand shouldn’t be penalized for declining to engage.

When a party receives a detailed letter demanding voluntary dismissal and warning of fee sanctions, it has legitimate options. It can engage substantively and negotiate. It can reject the demand and proceed with litigation. Or it can ignore the letter entirely and let the litigation proceed on its merits.

All three are legitimate responses. “Walking away” from a settlement demand isn’t misconduct—it’s a tactical choice to let the case proceed through normal channels. The demanding party’s remedy is to litigate: file a motion to dismiss, serve an as-yet unfiled Rule 11 motion, or move for summary judgment. These procedures exist precisely to test substantive assertions through proper adjudication.

The EscapeX framework creates a different dynamic untethered to procedural and evidentiary rules that ultimately promotes aggressive letter writing campaigns. Under this approach, a defendant can:

1. Send detailed letters asserting that the plaintiff’s claims are frivolous, demanding dismissal, and warning of fee sanctions.

2. Wait for silence.

3. Move for fees under § 285, using the letters as evidence that the plaintiff was “on notice” of the complaint’s frivolousness.

4. Characterize the plaintiff's silence as evidence that no reasonable response exists and therefore that the letters’ substantive assertions should be accepted as true.

5. Avoid both Rule 11’s 21-day safe harbor and formal motions practice under Rule 12 or Rule 56 entirely.

This framework transforms settlement correspondence into a trap. Respond substantively and you’ve engaged in settlement negotiations that could limit your strategic options. Stay silent and your silence becomes evidence of frivolousness. Either way, the defendant has created a record for future sanctions motions without ever testing its theories through formal adjudication.

The Procedural Sidestep

At the time of Google’s § 285 motion, the case had not progressed beyond the pleadings. No claim construction had occurred. No discovery had been taken. No dispositive motions had been filed or decided.

The operative question at that stage should have been straightforward. Did EscapeX’s complaint and its patent claim charts adequately notify Google of its infringement theory? Pleading-stage claim charts serve a notice function—they identify the accused product and map it to patent claim elements so the defendant understands what’s being accused. They aren’t final infringement contentions. They don’t require the precision that comes after claim construction defines the claim terms or after discovery reveals the accused product’s actual functionality.

The district court’s exceptional case finding didn’t address this notice pleading question. Instead, it sidestepped the issue at hand and effectively granted summary judgment on noninfringement—concluding that EscapeX’s theory was frivolous because the accused Auto-Add feature “predated EscapeX’s patent.” But reaching that conclusion requires resolving questions that were never adjudicated.

Start with claim construction. The ’113 patent’s claims require an “artist specific application” that the specification distinguishes from “a single application that streams music from multiple artists.” Whether YouTube Video with Auto-Add meets this limitation—or any other claim limitation—depends on how those terms are construed. The court never construed them. Google’s position that the claims don’t cover YouTube Video remained an assertion, not an adjudication. Yet the court accepted them.

The Federal Circuit’s treatment of this issue is telling. In a footnote, the court acknowledged that EscapeX had pointed to claim construction arguments it had raised, but dismissed their relevance: “there was no reason for the district court to turn to claim construction (which had not yet even been briefed) in evaluating EscapeX’s opposition to the attorneys’ fees motion.” EscapeX, slip op. at 9 n.3. But if a court is going to find infringement claims frivolous, shouldn’t it first determine what the claims mean?

Then consider discovery. Google’s letters asserted that the Auto-Add feature predated the patent’s October 2014 priority date, pointing to a June 2014 public announcement. But “Auto-Add” is a product name, not a technical specification. Software products evolve. Features are added, modified, redesigned. The Auto-Add that existed in June 2014 and the Auto-Add that existed when EscapeX filed suit may share a name while differing in functionality. Whether the pre-priority-date version practiced the asserted claims—or whether claim-relevant functionality was added later—is precisely the kind of question discovery exists to answer.

No discovery occurred.

The court’s frivolousness finding thus rested on an implicit determination that no genuine issue of material fact existed regarding infringement—the summary judgment standard—without the procedural protections that normally accompany such a determination. No claim construction. No discovery. No motion briefing on the technical questions. Just Google’s letters asserting that EscapeX’s theory was self-defeating, and EscapeX’s failure to respond with evidence of its own.

This procedural posture matters because it determines what EscapeX was required to show. At the pleading stage, the question is adequate notice of infringement. Does the defendant understand what it’s accused of? EscapeX’s claim charts identified Auto-Add and mapped it to the claim elements. That may or may not have been sufficient notice—but that pleading-stage question was never answered. Instead, the court leapfrogged to the merits, finding the underlying theory frivolous based on timing assertions that were never tested against construed claims or developed facts.

The Federal Circuit relied on Thermolife for the proposition that fees can be awarded without full merits adjudication. But Thermolife itself cautioned that “more process may well be needed on a fees motion when the issue presented as a basis for fees has not previously been litigated.” 922 F.3d at 1357. Here, the infringement issue had not been litigated at all—and the district court’s two-page order is evidence of less process, not more.

The result is an attorneys’ fees award grounded in merits conclusions that no court ever actually reached through either proper adjudication or Thermolife’s “more process.” Google got a merits ruling without ever having to actually litigate the merits.

The Triggering Event Paradox

Perhaps the deepest irony in EscapeX is what actually triggered Google’s ability to seek fees: EscapeX’s voluntary dismissal with prejudice.

Consider the timeline. Google sent letters demanding dismissal. EscapeX didn’t respond. The ’113 patent was invalidated in Block. The appeal period expired. Google demanded dismissal again. EscapeX voluntarily dismissed with prejudice.

That dismissal was exactly what a reasonable litigant should do when its patent is invalidated and appeal rights expire. EscapeX stopped litigating a case it could no longer win. It didn’t force Google to brief a summary judgment motion on patent invalidity or noninfringement. It didn’t waste judicial resources on a lost cause.

For this responsible decision, EscapeX was sanctioned.

But what should EscapeX have done differently? By dismissing, EscapeX gave Google exactly what Google’s letters demanded. Yet Google chose to expend additional resources pursuing § 285 sanctions—asserting that EscapeX should never have brought the case at all. In doing so, Google assumed the very burden it had insisted it should never have to bear: proving that EscapeX’s claims lacked merit. Google’s letters had complained about having to file motions to dismiss or for summary judgment if EscapeX persisted. EscapeX didn’t persist. It dismissed.

Yet, the court let Google have its cake and eat it too. Google avoided the burden of formal dispositive motion practice—no Rule 12(b)(6) motion, no summary judgment briefing, no claim construction, no discovery. Yet it reaped the rewards of a prevailing party that had proven the case exceptional on the merits. The dismissal that spared Google from further litigation became the platform for a fees sanction with the court essentially presuming, without deciding, that EscapeX’s claims were frivolous.

The Prevailing Party Question

This connects to an argument EscapeX raised below but abandoned on appeal: whether Google was properly a “prevailing party” under § 285.

The Supreme Court held in CRST Van Expedited, Inc. v. EEOC, 578 U.S. 419, 431 (2016), that a defendant can be a prevailing party without a merits ruling when—as follows a voluntary dismissal with prejudice—there is “a material alteration in the legal relationship between the parties.” EscapeX voluntarily dismissed with prejudice. Google, derivatively benefiting from another defendant’s victory in Block, became the prevailing party. The paradox lies not in the law of prevailing-party status, but in how that status enabled a merits-free § 285 award.

Being a prevailing party only gets Google to the threshold. The harder question is whether this case was truly “exceptional” under Octane Fitness. And here, the analytical structure begins to falter.

Under Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545, 554 (2014), an exceptional case is one that “stands out from others with respect to the substantive strength of a party’s litigating position . . . or the unreasonable manner in which the case was litigated.” Courts consider the totality of the circumstances, including frivolousness, motivation, objective unreasonableness, and inadequate pre-suit investigation. The framework requires at least one of these factors be present.

Take them one by one.

Frivolousness. To find claims frivolous, a court must determine they lacked merit. But no court ever determined that here. No claim construction defined the patent’s terms. No discovery established what the accused product actually did and when it did it. No dispositive motion tested Google’s theories. The Block court invalidated the patent under § 101—but that ruling addressed patent eligibility, not whether EscapeX’s infringement theory was frivolous as applied to Google’s products. Without substantive adjudication, the frivolousness finding rests on nothing but Google’s untested assertions in correspondence that arguably should have been excluded under Rule 408.

Pre-suit investigation. The reason inadequate pre-suit investigation supports exceptionality is that a proper investigation would have revealed the claims were meritless. But this inquiry is derivative of the frivolousness inquiry. If you haven’t established the claims were meritless, the adequacy of the pre-suit investigation is irrelevant. An inadequate pre-suit investigation that happens to yield meritorious claims isn’t sanctionable—it’s fortunate. Without a predicate frivolousness finding grounded in actual adjudication, the pre-suit investigation inquiry has no foundation and no relevance.

Unreasonable litigation conduct. If frivolousness and pre-suit investigation are unavailable, only “unreasonable manner of litigation” remains. So what, exactly, was unreasonable about EscapeX’s litigation conduct?

Consider the record. EscapeX filed a complaint—routine. It filed an amended complaint—routine. It didn’t oppose a transfer motion—which saved judicial resources, not wasted them. It voluntarily dismissed with prejudice after its patent was invalidated elsewhere—the responsible course when a case becomes unwinnable.

The “unreasonable” conduct the court actually relied upon was EscapeX’s silence in response to Google’s letters. But silence in response to informal correspondence isn’t litigation misconduct. No rule requires parties to respond to demand letters. No procedural mechanism compels engagement with an adversary’s informal assertions alleging meritless claims. If Google wanted a formal response, Rule 11 provides the mechanism to obtain one. Serve an as-yet unfiled motion and trigger the 21-day safe harbor. Google never did.

That leaves the false stipulation of dismissal—the document EscapeX’s counsel filed, falsely representing that Google had agreed to dismissal with each party bearing its own costs, expenses, and attorneys’ fees. This was genuine misconduct. But it was a discrete incident, not a pattern of litigation abuse. And it occurred after EscapeX had already decided to dismiss. EscapeX withdrew the stipulation when confronted, the same day no less.

But does one false representation—corrected when discovered, concerning the terms of dismissal rather than the pursuit of frivolous claims—render an entire case “exceptional”?

Strip away the factors, and the exceptionality finding rests on this: silence in response to informal letters and a withdrawn false stipulation of dismissal.

None of these establish that EscapeX’s substantive claims were weak. None forced Google to expend significant resources defending the merits or correcting procedural misconduct. The case “stands out” not because of how it was litigated, but because of how it ended—and the inferences the court drew from EscapeX’s failure to fight back.

The False Stipulation’s Shadow

We can’t discuss EscapeX without acknowledging the elephant in the room: the false stipulation of dismissal. Filing a document with a self-serving provision the other side never agreed to is serious misconduct. The district court called EscapeX’s attorneys “lucky that Google did not separately ask the Court to impose sanctions on them” for this alone. D. Ct. op. at 2.

This misconduct almost certainly colored everything that followed. When a party files a false document, courts naturally view its other conduct less charitably. EscapeX’s silence in response to letters? Must be because it knew Google was right. Its failure to present pre-suit investigation evidence when opposing Google’s fees motion? Must be because no real investigation occurred. Its dismissal after patent invalidation? Must be because the case was always frivolous.

Each of these inferences has an alternative explanation. But the false stipulation of dismissal may have influenced the court to discredit all of them.

The district court’s brief two-page order offers additional clues related to this possible predisposition. Beyond the false stipulation, the court noted that “EscapeX and its parent company DynaIP have a history of bringing frivolous suits for this purpose”—essentially using prior litigation patterns as character evidence against EscapeX. Id. This suggests a ruling based on propensity rather than proof. A presumption that EscapeX’s current case was frivolous because prior cases allegedly were.

Whether those prior cases were actually frivolous, and whether EscapeX’s conduct in them bears on the merits of this case, received no analysis. The court’s two-page order simply declared the frivolousness of EscapeX’s claims against Google, “obvious.”

This is the “bad acts make bad law” dynamic at work. EscapeX’s misconduct—both the false stipulation of dismissal and its litigation history—created a record where the court may have been predisposed to rule against it on everything. Once a party is tagged as a “patent troll” with a “history of bringing frivolous suits,” the hard analytical work of determining whether this particular case was frivolous becomes easier to avoid. Id. The labels substitute for analysis.

What Could EscapeX Have Done?

EscapeX’s procedural failures were undeniable. It arguably failed to present evidence of its pre-suit investigation when opposing Google’s fees motion which was based, in part, on alleged inadequate investigation. It tried to fix this through Rule 59(e) instead of doing it right the first time. Each of these failures contributed to its loss.

But EscapeX also failed to raise arguments that might have changed the outcome:

The Rule 408 objection. EscapeX apparently never argued that Google’s letters were protected settlement correspondence that shouldn’t be used to prove the merits of its claims. This argument has real force, as discussed. Its absence from the briefing meant the Federal Circuit never addressed it head on.

The procedural framework argument. EscapeX could have argued that the Federal Rules provide specific mechanisms for testing claims that lack a good faith basis—Rule 11’s safe harbor, Rule 12(b)(6)’s motion practice—and that § 285 shouldn’t permit end-runs around these protections. At a minimum, the district court’s two-page order failed to show that EscapeX was afforded “more process” required by Thermolife in the absence of those protections.

The “adequate notice” argument. At the pleading stage, claim charts serve a notice function—they identify the accused product and map it to patent claim elements. They aren’t final infringement contentions. EscapeX might have argued that criticizing its claim charts for lacking software version-specific precision conflates pleading standards with post-discovery precision requirements.

This was not a case where EscapeX persisted in asserting meritless claims after receiving full discovery. Perhaps discovery would show that the claimed function existed in YouTube Video's Auto Add functionality before the '113 patent's priority date as Google contended. If so, it would be incumbent on EscapeX to dismiss its complaint.

But the proper framework for evaluating EscapeX’s claims at this stage was the pleading standard, not a merits determination. When testing a complaint under Rule 12(b)(6), a court must accept well-pleaded factual allegations as true and determine whether they plausibly state a claim for relief. See Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009).

Critically, the court’s review is generally limited to the four corners of the complaint—if matters outside the pleadings are considered, the motion must be converted to one for summary judgment with its attendant procedural protections. Fed. R. Civ. P. 12(d).

Here, the court credited Google’s letters—extrinsic documents asserting that EscapeX’s factual allegations were self-defeating—to find EscapeX’s claims frivolous. Yet EscapeX received neither the presumptions that govern pleading-stage review nor the procedural protections that would accompany conversion to summary judgment.

EscapeX’s complaint and its exhibited claim charts arguably accomplished all that was then required. They placed Google on notice of the products and features accused of infringement. Under the proper pleading-stage requirements, EscapeX’s infringement claims were not frivolous.

The lack of adequate pre-suit investigation argument. The irony is that EscapeX did have evidence of its pre-suit investigation—declarations from its president and an engineer who prepared its claim charts.

The problem was timing. EscapeX presented these declarations in support of its Rule 59(e) motion to amend the judgment, not in opposition to Google’s original § 285 motion. The court excluded them as untimely, and the Federal Circuit affirmed. This procedural misstep created an evidentiary vacuum—and into that vacuum, the court assumed that no adequate investigation had occurred.

But this assumption inverts the burden of proof.

Google never actually proved EscapeX’s inadequate pre-suit investigation. As movant, Google bore that burden. In the ordinary course, a defendant develops evidence of investigation inadequacy through discovery—interrogatories about the investigation, document requests for non-privileged information about the underlying analysis, a Rule 30(b)(6) deposition on the topic. None of that happened here. The case never progressed beyond the pleadings.

Google’s only “evidence” was its own letters asserting that a proper investigation would have revealed the case was meritless. But those letters aren’t evidence of what EscapeX did or didn’t do. They merely recite attorney argument. Without discovery, Google had no evidence of EscapeX’s actual pre-suit investigation or lack thereof.

Yet the court found inadequate pre-suit investigation—not because Google proved it, but because EscapeX failed to disprove it. The burden had silently shifted. At oral argument, EscapeX’s counsel recognized that the court expected rebuttal evidence on an issue Google raised but had not proven. There were no factual averments in Google’s opening brief to rebut. But the court demanded answers anyway. When EscapeX’s counsel requested leave to file a declaration to provide those answers, the court refused. EscapeX had already missed its chance.

Or was that chance wrongly denied? EscapeX opposed a motion on which Google bore the burden. Google essentially argued an inference, without supporting evidence, that no reasonable pre-suit investigation would produce EscapeX’s meritless claims. It follows therefore that no adequate pre-suit investigation occurred.

Technically, EscapeX was under no obligation to disprove a negative. The procedural default the court identified—failure of EscapeX to present pre-suit investigation evidence in its opposition brief—assumes a burden that properly belonged to Google.

As a matter of good practice, EscapeX would have been wise to marshal its evidence in response to Google's allegations. But the failure to do so should not have been treated as proof that no reasonable investigation occurred—only as an absence of rebuttal to allegations that Google itself never proved on the record.

Reducing the “exceptional case” to its core. Perhaps most fundamentally, EscapeX could have forced the court to confront what Google actually had to do in this case.

After stripping away the procedural shortcuts, the burden-shifting, and the reliance on extrinsic evidence, what remains? At its core, this case required Google to do only two things: (1) answer the complaint, and (2) agree to EscapeX’s voluntary dismissal with prejudice. That’s it. No claim construction. No discovery. No summary judgment briefing. No trial. Google was never required to defend the merits of a single substantive motion. EscapeX even consented to Google’s motion to transfer the case.

The Octane Fitness standard asks whether a case “stands out from others with respect to the substantive strength of a party's litigating position . . . or the unreasonable manner in which the case was litigated.” 572 U.S. at 554. EscapeX could have argued that, measured by what Google was actually required to do—as opposed to what it chose to do by sending letters and pursuing fees—this case looked remarkably ordinary. A complaint was filed. An answer was served. The patent was invalidated elsewhere. The case was dismissed.

That sequence describes countless patent cases that end without fanfare and without fee awards.

By failing to make this argument, EscapeX allowed the court to focus on inferences drawn from its silence and procedural missteps—inferences that filled evidentiary gaps Google never closed with actual proof. Perhaps reframing the case around Google’s actual litigation burden might not have changed the outcome, but it would have forced a harder look at whether this case truly “stood out” from the ordinary course of patent litigation.

Implications for Patent Litigators

What does this new EscapeX sanctions framework mean for patent practitioners?

First, respond to substantive adversary communications—even informal ones. Silence can now be characterized as concession. You don’t need to preview your entire case, but some response is better than none. A brief acknowledgment that you’ve received the letter, dispute its contentions, and will address them through proper litigation channels at least breaks the silence the court might later characterize as a damning concession.

Second, create your record during fees briefing, not after. Rule 59(e) is not a vehicle for submitting evidence you could have submitted earlier. If there’s any possibility of a fees motion for baseless claims, present your pre-suit investigation evidence when opposing that motion, especially when inadequate pre-suit investigation is alleged. Declarations from your engineers, documentation of your analysis, evidence of the technical work underlying your infringement theory—all of this should be in the record the first time.

Third, consider raising Rule 408 objections. If the defendant seeks to use settlement correspondence to establish frivolousness, object. The argument hasn’t been fully tested in the § 285 context, but EscapeX suggests courts will allow such evidence absent objection. Preserving the issue at least keeps the argument available for appeal.

Fourth, understand the risks of voluntary dismissal. Dismissing a case—even for legitimate reasons like patent invalidation elsewhere—can trigger fee exposure. If you’re going to dismiss, consider whether you should expressly negotiate the dismissal terms, including a mutual release of claims for attorneys’ fees, rather than simply filing a dismissal that is silent on those issues.

Questions for Courts

EscapeX raises questions that future panels may need to address:

Should Rule 408 apply to § 285 proceedings? The rule protects settlement communications from use “to prove or disprove the validity . . . of a disputed claim.” Using such communications to prove frivolousness—which requires showing the claims lacked merit—seems to fall within this prohibition. But Blackbird Tech’s allowance of settlement offer amounts as evidence of litigation conduct complicates the analysis. The distinction between using communications to show how a case was litigated versus whether the claims had merit needs clarification.

Should § 285 permit bypassing Rule 11’s safe harbor? Rule 11 exists precisely to give parties formal notice and an opportunity to withdraw frivolous positions before sanctions attach. If § 285 allows fee-shifting based on informal correspondence that never triggers Rule 11’s protections, the safe harbor is meaningless.

What constitutes adequate notice at the pleading stage? EscapeX’s claim charts were criticized for identifying the Auto-Add feature “wholesale” in the absence of discovery that might inform the court about when relevant functionality came online. But at the pleading stage, before discovery, how much specificity should be required? The tension between pleading standards and post-discovery precision calls for more careful consideration of case posture when applying § 285.

When extrinsic evidence is used to establish frivolousness, should summary judgment protections apply? Rule 12(d) provides that when “matters outside the pleadings” are considered on a motion to dismiss, the motion “must be treated as one for summary judgment” with its attendant procedural protections—including the opportunity to conduct discovery and present evidence. Here, the district court credited Google’s letters—documents outside EscapeX’s pleadings—to conclude that EscapeX’s infringement theory was frivolous. If a court relies on extrinsic evidence to find claims meritless for § 285 purposes, should the non-movant receive the same procedural protections that Rule 12(d) guarantees when extrinsic evidence converts a motion to dismiss into summary judgment? The alternative—allowing courts to credit extrinsic assertions without discovery or evidentiary process—creates an end-run around protections the Federal Rules otherwise require.

What does Thermolife’s “more process” requirement actually entail? Thermolife recognized that “more process may well be needed on a fees motion when the issue presented as a basis for fees has not previously been litigated.” 922 F.3d at 1357. But neither Thermolife nor EscapeX specifies what that process should look like in the absence of formal Rule 12 or Rule 56 motions. Should the movant be required to support its frivolousness allegations with actual evidence—declarations, technical analysis, expert opinions—rather than attorney argument in correspondence? Should the non-movant be entitled to limited discovery on the issues underlying the § 285 motion? Should the court conduct an evidentiary hearing? Should claim construction occur before a court can find infringement claims frivolous? Thermolifes“more process” language implies procedural protections beyond what EscapeX received, but without guidance on what those protections are, district courts lack a framework for implementing them—and appellate courts lack a standard for reviewing their absence.

When does silence in response to adversary letters support frivolousness? Not every failure to respond to a demand letter should constitute evidence of bad faith. Some letters are unreasonable and some issues are genuinely in dispute. Typically, disputed issues should be resolved through litigation, not informal correspondence. Guidance on when silence is probative versus when it’s simply a permissible tactical choice would benefit both plaintiffs and defendants.

Who bears the burden of proving inadequate pre-suit investigation? The movant seeking fees should bear the burden of proving each element of exceptionality. If inadequate pre-suit investigation is alleged, the movant should be required to present evidence—not merely allegations—of what the non-movant did or failed to do. Shifting the burden to the non-movant to disprove a negative inverts the standard framework and creates unfair procedural traps.

When is prior litigation history properly considered in § 285 determinations? The district court referenced that “EscapeX and its parent company DynaIP have a history of bringing frivolous suits” as support for its exceptional case finding. D. Ct. op. at 2. But using a party’s prior litigation conduct as evidence that its current claims are frivolous is classic propensity reasoning—the inference that because a party acted badly before, it probably acted badly again. Courts generally disfavor such reasoning because it substitutes character for proof.

If prior litigation history is relevant at all, it should bear some logical relationship to the conduct at issue. For example, if a patent owner was previously sanctioned for filing suit without adequate pre-suit investigation, and the current case reflects the same deficiency, the prior sanction might show the party failed to learn from past mistakes. Or if a pattern of cases reveals a deliberate business model of filing baseless suits to extract nuisance settlements—as in Blackbird—the pattern itself becomes evidence of litigation conduct in the current case.

But the district court’s cursory reference to EscapeX’s litigation “history” did neither. It offered no analysis of what the prior cases involved, whether sanctions were imposed, or how the alleged prior conduct related to the claims against Google. The inference was simply: EscapeX has been accused of filing frivolous suits before; therefore, this suit must be frivolous too. That is guilt by association with one’s own past, not proof of the conduct at issue. Courts should require more than labels and litigation history to establish exceptionality—they should require a substantive connection between the prior conduct and the current case, or else the “history” is just impermissible character evidence dressed in litigation clothing.

Conclusion 

EscapeX will likely be remembered as another case where a “patent troll” filed frivolous claims and paid the price. That narrative isn’t wrong—EscapeX’s conduct appears indefensible in many respects, and sanctions may well have been deserved.

But the framework the case establishes extends beyond EscapeX’s alleged misdeeds. It allows defendants to establish bad faith claims through letter writing campaigns that bypasses Rule 11’s procedural protections. It treats silence in response to settlement demands as evidence of concession. It enables fee awards based on untested merits positions that were never adjudicated or afforded “more process.” It shifts the burden to non-movants to disprove allegations the movant never proved.

For EscapeX, these issues are now academic. Its missteps were serious enough that any framework would likely have produced the same or similar result. But for the next litigant—one who receives a detailed settlement demand, reasonably declines to engage, and later voluntarily dismisses when circumstances change—the EscapeX framework creates risks that didn’t exist before.

The silence that sanctioned EscapeX may echo in ways the Federal Circuit did not intend.